Consumer surplus vs. welfare standard in a political economy model of merger control
This paper considers merger control in a common agency framework where firms and their competitors can influence the antitrust agency and where transparency - while making lobbying less effective - also implies real resource costs. We examine the performance of two alternative standards that can be assigned to the antitrust agency in the presence of these regulatory failures. We find that under a welfare standard, lobbying leads to the clearance of relatively inefficient mergers that decrease welfare (i.e. there is a type II error). By contrast, under a consumer surplus standard, the agency will ban relatively efficient mergers that would increase welfare (i.e. there is a type I error). Lobbying actually reduces the extent to which this occurs, albeit at a cost in terms of real resources. We also find that a consumer surplus standard is more attractive when mergers are large, when increasing the size of a merger greatly enhances industry profits, when there is little transparency, and when co-ordination costs amongst competitors are low.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 23 (2005)
Issue (Month): 9-10 (December)
|Contact details of provider:|| Web page: http://www.elsevier.com/locate/inca/505551|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Grossman, Gene M & Helpman, Elhanan, 1994.
"Protection for Sale,"
American Economic Review,
American Economic Association, vol. 84(4), pages 833-850, September.
- Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 162, Princeton, Woodrow Wilson School - Public and International Affairs.
- Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 21-92, Tel Aviv.
- Grossman, Gene & Helpman, Elhanan, 1993. "Protection for Sale," CEPR Discussion Papers 827, C.E.P.R. Discussion Papers.
- Gene M. Grossman & Elhanan Helpman, 1992. "Protection For Sale," NBER Working Papers 4149, National Bureau of Economic Research, Inc.
- Jean-Jacques Laffont & Jean Tirole, 1991. "The Politics of Government Decision-Making: A Theory of Regulatory Capture," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 1089-1127.
- Jean-Jacques Laffont & Jean Tirole, 1988. "The Politics of Government Decision-Making: A Theory of Regulatory Capture," Working papers 506, Massachusetts Institute of Technology (MIT), Department of Economics.
- Jean-Jacques LAFFONT & Jean TIROLE, 1990. "The Politics of Government Decision-Making : a Theory of Regulatory Capture," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9004, Université de Lausanne, Faculté des HEC, DEEP.
- Posner, Richard A, 1975. "The Social Costs of Monopoly and Regulation," Journal of Political Economy, University of Chicago Press, vol. 83(4), pages 807-827, August.
- Besanko, David & Spulber, Daniel F, 1993. "Contested Mergers and Equilibrium Antitrust Policy," Journal of Law, Economics, and Organization, Oxford University Press, vol. 9(1), pages 1-29, April.
- Rama, Martin & Tabellim, Guido, 1998. "Lobbying by capital and labor over trade and labor market policies," European Economic Review, Elsevier, vol. 42(7), pages 1295-1316, July.
- Martín Rama & Guido Tabellini, "undated". "Lobbying by Capital and Labor over Trade and Labor Market Policies," Working Papers 94, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Timothy Besley & Stephen Coate, 1997. "An Economic Model of Representative Democracy," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 85-114.
- Tim Besley & Stephen Coate, "undated". ""An Economic Model of Representative Democracy''," CARESS Working Papres 95-02, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
- Tim Besley & Stephen Coate, "undated". "An Economic Model of Representative Democracy," Penn CARESS Working Papers ecf70d639d700dba5327ab0c8, Penn Economics Department.
- Bernheim, B Douglas & Whinston, Michael D, 1986. "Common Agency," Econometrica, Econometric Society, vol. 54(4), pages 923-942, July.
- Harberger, Arnold C, 1971. "Three Basic Postulates for Applied Welfare Economics: An Interpretive Essay," Journal of Economic Literature, American Economic Association, vol. 9(3), pages 785-797, September. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eee:indorg:v:23:y:2005:i:9-10:p:829-848. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.